Industry Analysis : Tesoro Corporation Essay

868 WordsOct 15, 20154 Pages
Industry Description Tesoro Corporation operates in the Oil and Gas Refining and Marketing sector within the United States. This is actually a sub-industry, making up ten percent of Oil, Gas, and Consumable Fuels, which is—generally speaking—one of several sectors of the energy industry. The industry codes for Petroleum Refining are 2911 (SIC) and 324110 (NAICS). The way firms generate revenue in this industry is by purchasing crude oil for a low price, refining it, and then selling the product for a higher price, primarily at gas stations to customers who drive passenger cars (Figure 1). The refining operations are known as “upstream” processes, while the marketing portion of the firm is its “downstream” operation. Tesoro does not actually proceed so far “upstream” that they actually drill for oil, however. In petroleum refining and marketing, firms’ costs and profits are very dependent on the price of crude oil, and incumbent companies generally own a great deal of capital equipment (refineries and gas stations). Tesoro has six of its own refineries, all located in the western United States, with a total capacity of 850,000 barrels per day. Barrels per day is an important metric in this industry; one barrel is equal to 42 gallons. The largest market share in this industry belongs to ExxonMobil, a firm that operates 30 refineries worldwide and refines 5.3 million barrels daily. Tesoro Corporation buys crude oil from both foreign and domestic sources called
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